A union bargains with that monopsonist plant. What can happen to wages and employment?

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Question

A union bargains with that monopsonist plant. What can happen to wages and employment?

Accepted Answer

Both can rise, up to the competitive wage, because the employer now faces a fixed wage rather than a rising one — Award 1 mark. Beyond the competitive wage the standard result reappears and employment falls, so how far the union pushes matters.

Answer

Employment rises but wages must fall

Answer

Both can rise, up to the competitive wage, because the employer now faces a fixed wage rather than a rising one

Answer

Wages rise and employment must fall, as in any labour market

Answer

Neither changes, since the plant has no competitors

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